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Summary:

Reiterate ADD with a Price Target of RM15.10, based on 1.8x CY14 P/B We reiterate our ADD rating with an unchanged price target of RM15.10, valuing Hong Leong Bank (HLB) at a P/B multiple of 1.8x based on a CY14 ROE of 14.7%, premised on a 5% growth rate and a 10.2% cost of equity. In our view, the year ahead remains exciting for HLB as there is room for further re-rating. HLB is well-positioned to benefit from the recovery in regional and domestic growth (2014 forecast: 5.5% vs. 2013 forecast of 4.8%). Despite headwinds arising from tighter regulation on the domestic front, we remain upbeat on management’s focus on its strategic priorities in beef up its regional business while seeking organic transformational growth opportunities.

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